Van Winkle v. Comm'r of Internal Revenue (In re Estate of Van Winkle) , Docket No. 4467–67.
| Decision Date | 19 March 1969 |
| Docket Number | Docket No. 4467–67. |
| Parties | ESTATE OF MABEL C. VAN WINKLE, DECEASED, ROBERT VAN WINKLE, COEXECUTOR AND THOMAS SHERWOOD VAN WINKLE, COEXECUTOR, petitioners v. COMMISSIONER OF INTERNAL REVENUE, respondent |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Decedent died Oct. 7, 1963. Her husband died Dec. 1, 1951. The husband's will provided that decedent was to receive the income for life from the residue of his estate and that she was to have a general power of appointment over one-half of the trust corpus and the accumulated income. Respondent assessed a deficiency, agreed to by the executors of the husband's estate, based in part upon the disallowance of the marital deduction claimed for the trust property. The husband's estate failed to file a timely claim for refund to recover the amount resulting from the disallowance of the marital deduction pursuant to the relief provisions of sec. 93, Technical Amendments Act of 1958. Respondent determined that decedent's gross estate included the value of the assets, subject to the power of appointment, which had been disallowed as a marital deduction in the husband's estate. Held:
1. That the value of the general power of appointment in the decedent over one-half of the corpus and income accrued and accumulated in the residuary trust created under the will of her husband is includable in her gross estate under sec. 2041(a)(2), I.R.C. 1954.
2. That respondent is not estopped from including the value of the power of appointment as an asset in decendent's gross estate.
3. That petitioners are not entitled to a credit under sec. 2013(a), I.R.C. 1954, for prior estate tax paid on the property which passed to decedent from her husband's estate.
4. That this Court lacks jurisdiction to consider and apply the doctrine of equitable recoupment. Harold Kamens and Leonard M. Atlas, for the petitioners.
William M. Gross, for the respondent.
Respondent determined a deficiency in the estate tax of petitioners in the amount of $8,254.98.
The issues for decision are:
(1) Whether the value of a power of appointment over the corpus of a trust created under the will of Stirling Van Winkle, deceased, should be included in the gross estate of Mabel C. Van Winkle, deceased.
(2) Whether petitioners are entitled to a credit for prior estate tax paid on property which passed to Mabel C. Van Winkle from the Estate of Stirling Van Winkle.
(3) Whether the doctrine of equitable recoupment will allow petitioners to set off any part of the estate tax paid by the Estate of Stirling Van Winkle against the deficiency determined by respondent in this case.
All of the facts have been stipulated and are found accordingly. The pertinent facts are set out below.
Petitioners are the executors of the Estate of Mabel Van Winkle, deceased, who died on October 7, 1963. At all times material hereto and at the time the petition was filed herein, the legal residences of the executors, Robert Van Winkle and Thomas Sherwood Van Winkle, were Rutherford, N.J., and Weston, Conn., respectively. The decedent's estate was administered under the jurisdiction of the Surrogate's Court of Bergen County, N.J.
The decedent's husband, Stirling Van Winkle, died testate on December 1, 1951. His will created a power of appointment in Mabel over a specific portion of a residuary trust. Paragraph Sixth in his will reads, in part, as follows:
SIXTH: All the rest, residue, and remainder of my estate, real, personal, or mixed, including any power of appointment that I may have or acquire, and wheresoever situated, I give, devise, and bequeath to my trustees or trustee here-in-after named in trust for the following uses and purposes, viz:
(a) To pay the net income, monthly, from said trust estate unto my said wife, Mabel C. Van Winkle, for and during the term of her natural life.
(b) If, for any reason, my said wife is unable to care for herself or becomes mentally or physically deficient or handicapped, I authorize and empower my trustees or trustee to use the income and as much of the principal of the trust estate as may be advisable in the judgment of my trustees or trustee, for her support, maintenance, and care. Further, in the event that the income from my trust estate has shrunk or should decrease materially, or living expenses or costs increase substantially, I authorize my trustees or trustee to make payments from the principal of my trust estate, if, in the judgment of my said trustees of trustee, it becomes advisable to do so for the benefit of my said wife; and in so doing my trustees or trustee need not account to any remainderman.
(c) Upon the death of my wife, Mabel C. Van Winkle, I direct my trustees or trustee to pay over to my children, William S. Van Winkle, Robert Van Winkle, and Thomas S. Van Winkle, in equal shares, one half of all that may remain of the principal of the trust, together with one half of the accumulations of income, if any, and one half of the accrued income, if any. The other remaining one half of all that may remain of the principal of the trust, together with one half of the accumulations of income, if any, and one half of the accrued income, if any, I direct to be paid to whomsoever my wife may direct it to be paid to in accordance with her last will and testament. However, in the event my wife fails to exercise her power to dispose of this one half of the trust estate, then and in that event alone, such one half of the trust estate together with the accumulations of income, if any, and accrued income shall be paid in equal shares to my children, William S. Van Winkle, Robert Van Winkle, and Thomas S. Van Winkle, or disposed of in the same manner as the other half of the trust estate as per articles 6 d, e, or f.
The power of appointment was not included as an asset in Mabel's estate tax return.
The executors of both Mabel's estate and Stirling's estate were their sons, Robert and Thomas.
The estate tax return filed for Stirling's estate was examined by respondent's agents. On January 12, 1956, an Estate Tax Waiver of Restrictions on Assessment and Collection of Deficiency (T.D. Form 890) was signed by the coexecutors.
The deficiency in estate tax in Stirling's estate was based in part on the disallowance of the marital deduction claimed for the trust assets subject to the power of appointment created in Stirling's will. The marital deduction claimed in Stirling's estate tax return, the marital deduction allowed, and the marital deduction disallowed were as follows:
On March 17, 1967, the executors of Stirling's estate filed a claim for refund seeking to recover the deficiency resulting from the marital deduction which was disallowed in Stirling's estate. The claim for refund was disallowed by respondent on the ground that it was not timely filed pursuant to the relief provisions of the Technical Amendments Act of 1958, sec. 93(b), Pub. L. 85–866.
The notice of deficiency herein dated June 7, 1967, included the amount of $50,250 in Mabel's gross estate with the following explanation of the adjustment:
It has been determined that the General Power of Appointment over one-half ( 1/2) of the corpus and income accrued and accumulated in the residuary trust created under the Last Will and Testament of Stirling Van Winkle, date of death December 1, 1951, is includable in the gross estate of Mabel C. Van Winkle, date of death October 7, 1963, in accordance with section 2041 of the Internal Revenue Code.
The decedent died owning a general power of appointment over one-half of the corpus and accumulated income of a trust created under the will of her deceased husband. It is clear that this power of appointment is includable in her gross estate for estate tax purposes under the provisions of section 2041(a)(2), I.R.C.1 1954. It is equally clear that the power created under Stirling's will falls within the definition of the powers specified in the statute and does not fall within any of the exceptions created under section 2041(b)(1). The courts have consistently held that a general power of appointment which could be exercised by will is includable in the gross estate for estate tax purposes. See Ewing v. Roundtree, 346 F. 2d 271 (C.A. 6, 1965); Estate of Rebecca Edelman, 38 T.C. 972, 975 (1962).
The first argument made by petitioners is that the identical asset should not be taxed in two consecutive estates when the intention of Congress is to have such asset taxed only in one estate. What happened here is that the executors of Stirling's estate, who are also the petitioners in this case, claimed as part of the marital deduction the value of one-half of the residue. In auditing the estate the return filed in Stirling's estate, the Commissioner disallowed part of the marital deduction in accordance with the provisions of section 812(e)(1)(F), I.R.C. 1939. The executors signed a waiver of restrictions on assessment and collection, and the resulting deficiency was assessed and paid.
Section 93(a) of the Technical Amendments Act of 1958 amended section 812(e)(1)(F) to...
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